Concept Based Notes Cost Accounting - Guru Kpo
Biyani's Think TankConcept based notesCost Accounting[ B.Com. Part-II]B.N. GaurMBA, PGDBM,LecturerDeptt. of Commerce & ManagementBiyani Girls College, Jaipur
2Published by :Think TanksBiyani Group of CollegesConcept & Copyright :Biyani Shikshan SamitiSector-3, Vidhyadhar Nagar,Jaipur-302 023 (Rajasthan)Ph : 0141-2338371, 2338591-95 Fax : 0141-2338007E-mail : acad@biyanicolleges.orgWebsite :www.gurukpo.com; www.biyanicolleges.orgEdition : 2011While every effort is taken to avoid errors or omissions in this Publication, anymistake or omission that may have crept in is not intentional. It may be taken note ofthat neither the publisher nor the author will be responsible for any damage or loss ofany kind arising to anyone in any manner on account of such errors and omissions.Leaser Type Setted by :Biyani College Printing Department
Cost Accounting3PrefaceIam glad to present this book, especially designed to serve the needs of thestudents. The book has been written keeping in mind the general weakness inunderstanding the fundamental concept of the topic. The book is selfexplanatory and adopts the “Teach Yourself” style. It is based on question-answerpattern. The language of book is quite easy and understandable based on scientificapproach.Any further improvement in the contents of the book by making corrections,omission and inclusion is keen to be achieved based on suggestions from the reader forwhich the author shall be obliged.I acknowledge special thanks to Mr. Rajeev Biyani, Chiarman & Dr. Sanjay Biyani,Director (Acad.) Biyani Group of Colleges, who is the backbone and main conceptprovider and also have been constant source of motivation throughout this endeavour,who played an active role in co-ordinating the various stages of this endeavour andspearheaded the publishing work.I look forward to receiving valuable suggestions from professors of variouseducational institutions, other faculty members and the students for improvement of thequality of the book. The reader may feel free to send in their comments and suggestionsto the under mentioned address.
4SyllabusSection-A1. Introduction : Meaning and definiton of Cost Accountancy, cost accountingand costing. Distinction between financial and cost accounting. Elements ofCost.2. Material : Purchasing, storign and pricing of stores issued material control.3. Labour : Recording of time and wages, Methods of remuneration, incentiveplans, allocation of wages, labour turn-ov4er and treatment of idel-time, overtime.4. Overhead : meaning, Collection, Classifications, Appontionmnet allocationand absorption of overheads, treatment of interest on capital research anddevelopment expenses, Losses on account of depreciation, waste, obsolesceneand defectives.Section-B5. costing Methods : Single output or unit costing; operating costing, job andcontract costing; process costing (excluding equivalent production).6. Non-interngral accounting systems and Reconciliation between cost andfinancial statemetns.Section-C7. Cost volume Analysis : Meaning, Singnificance and Limitations, Break-evenanalysis, profit graph, profit-volume ratio, Assumptions of cost volume profitanalysis.8. Standard Costing : Meaning, Significance and Limitation. Types of standardsand variances pertaining to material and Labour.
Cost Accounting5Theoretical QuestionQ.1 What do you mean by Cost?Ans. Cost means account of expenditure incurred upon manufacturing of anarticle or providing any service.Q.2What do you understand by costing.Ans. Costing is the technique and process of determining cost.Q.3What is meant by cost accounting.Ans. Cost accounting is the provision of such analysis and classification ofexpenditure as will enable to ascertain the total cost of any particularunit of production.Q.4Mention name of four product for which order for cost audit isissued.Ans. (1)(3)Q.5Cement Industry(2)Electric IndustrySugar Industry(4)Bactor IndustryWhat is meant by supplementary cost?Ans. Supplementary cost is the cost of product other than direct cost.Q.6What is opportunity cost?Ans. The value of opportunity for gone is known as opportunity cost.Q.7Name four method of costing.Ans. (1)Unit costing(2)Operating costing(3)Contract costing(4)Process costing
6Q.8Explain Cost Unit?Ans. Cost unit is a measurement of any goods or service e.g. per ton km. perunit.Q.9Explain term cost centre?Ans. Cost centre is a location or item of any equipment which are connectedwith an undertaking for which cost are ascertained.Q.10 Difference between costing & cost accounting.Ans. (1) Costing is a dynamic technique in which changes may take placefrom time to time in comparison to cost accounting that enables todetermine and control the cost of manufactured goods.(2) Costing include determination of cost. Cost accounting includerecording expenditure and income.(3) Costing means technique for determination of cost whereas costaccounting means adoption of accounting system of cost.Q.11 Give two items which are not include in cost.Ans. Non cost items are profit on sale of fixed asset, goodwill w/o. discounton issue of share etc.Q.12 What is the difference between cost of goods sold and cost ofproduction.Ans. Cost of production means prime cost works overhead officeoverheard while cost of goods sold means cost of production opening stock of F.g. - closing stock of finished goods.Q.13 Write two objective of material control.Ans. (1)(2)control cost of inventory.provide material at right time.
Cost Accounting7Q.14 What is normal wastage of material?Ans. Normal wastage of material means any wastage due to normal reasonlike evaporation.Q.15 What is abnormal wastage?Ans. Any wastage arise due to abnormal. Reason like loss by fire, loss byearthquake.Q.16 What is ABC technique?Ans. It is a technique to control under these material classified three partsAB & C A include high value material B include. Medium valuematerial and C include low value material.Q.17 What is JIT purchase.Ans. Under this technique no stock maintain and material purchase whenhaving its demand.Q.18 What is economic order quantity ?Ans. Economic order quantity is that quantity of material where ordering &carrying cost minimum.Q.19 What is meant by wages abstracts?Ans. It is a statement and it include detail of wages prepare by costdepartment with the help of time card, wages sheet.Q.20 What is idle time?Ans. Idle time means no production hour but wages paid for that time.Q.21 Name the method of giving remuneration to workers.Ans. (1)Time rate method.
8(2)Piece rate method.(3)Piece rate with guaranteed pay rate(4)Differential piece rate method.Q.22 How labour separation rate is computed.Ans. Labor turnover rate no of spepratoinxAvg No of workers 100Q.23 What do you understand by time study?Ans. Time study is useful is determination of time require by an averageworker in a Job.Q.24 Write the formula of Halsey-weir premium plan.AnsAT X RATE [30% of ts x rate]Q.25 What is meant by overhead?Ans. Indirect material indirect labour & Indirect expenses are known asIndirect overhead.Q.26 Explain variable overhead.Ans. The cost which increase according to production known as variableoverhead.Q.27 Explain semi variable overhead.Ans. Overhead upto certain level fixed and after that variable known assemi variable overhead.Q.28 In how many classes are the indirect expenses classified under thefunctional classification name them.Ans. (1)Factory overhead.(2)Office overheard(3)Selling & Distribution overheard.
Cost Accounting9Q.29 State the name of four industries where unit costing is applied.Ans. (1)Brick Industry(2)Sugar Industry(3)Steel industry(4)Cement IndustryQ.30 What is meant by sub contract ?Ans. When contractor assign a portion of contract to any other person forcompletion of that portion.Q.31 What do you mean by cost plus contract?Ans. Contract price is determined after adding a certain percentage of profitor certain amount of profit on actual cost.Q.32 Explain escalation clause in the context of contract costing/What is the importance of escalation clause?Ans. Under this clause contract price will change in proportion to change inprice of material labour & other expenses.Q.33 What is meant by retention money?Ans. In case of incomplete contract a part of the certified work is paid by thecontractee to contractor. Rest of the amount is known as retentionmoney.Q.34 Mention the names of industries where process costing method maybe used.Ans. (1)Chemical industries(2)Mining industries.(3)Water & Gas Industries(4)Electric supply
10Q.35 Define joint productAns. Joint product is same type of product equal importance & value.Q.36 What is scrap?Ans. It is residue material from certain manufacturing operationQ.37 What do you mean by abnormal effective.Ans. When actual wastage is less than normal wastage then difference istermed as abnormal effective the balance transferred to P & L .Q.38 Give basic formula for valuation of abnormal wastage and abnormaleffective.Ans.Q.39 Give name of any five industries where operating costing method is used.Ans.(1)Bus(2)Hospital(3)Water supply industry(4)CanteenQ.40 What do you meant by marginal costing?Ans.Marginal costing is the ascertainment of marginal cost and its effect on profitof changes in value of type of output by differentiating between fixed cost andvariable cost.Q.41 Explain absolute tone kilometerAns.Journey from one station to another is treated as independent inurned distanceis multiplied by weight total of all journey is absolute tone kilometer.Q.42 What do you understand by commercial tone kilometer?Ans.Commercial tone kilometer is compared by multiplying average weight bytotal distance of journeys.
Cost Accounting11Q.43 Why cost and financial accounts are reconciled?Ans.Cost and financial accounts are reconcile. To verify the accuracy of bothaccounts.Q.44. Explain two reason for difference in profit as per cost book and financialbooksAns.(1)it may be due to under/over absorption of overhead(2)it may be due to valuation of stockQ.45 What do you meant by marginal costing?Ans.Marginal costing is mean ascertainment of marginal cost and its effect onprofit of changes in volume of type of output by differentiating between fixedcost and variable cost.Q.46 What do you mean by break even point.Ans.Break even point is that point where no profit/ no loss. At this pointcontribution is just equal to fixed cost.Q.47 Explain the meaning of profit volume ratio.Ans.Also known as PVRC100SQ.48 State two factors effecting break even point.Ans.(1)Increase in FC(2)Decrease in FC(3)Increase /Decrease in V.C
12Practical PartChapter-1Problem 2.1 : The following information relating to a manufacturing company isgiven. Calculate Prime Cost.Rs.Stock of Raw Material on 1.1.05Purchases of Raw MaterialProductive WagesChargeable ExpensesNon-productive WagesCarriage on Raw materialHaulage ( qykbZ)Stock of Raw Material on ,02,000Solution:Statement of CostParticularsOpening Stock of Raw MaterialRs.1,12,500Add: Purchases of Raw MaterialAdd: Carriage on Raw Material2,38,5005,0003,56,0001,02,000Less: Closing Stock of Raw MaterialRaw Material ConsumedProductive Wages (Direct)Chargeable Expenses (Direct)Prime CostRs.2,54,00080,0004,0003,38,000
Cost Accounting13Problem 2.2: From the following particulars, prepare a cost statement showingcomponents of Total cost and the Profit for the year ended 31st December,1995:Rs.Stock of finished goods 1 January, 20055,000Stock of raw materials 1 January, 200545,000Purchase of raw materialsCarriage inwardsWages4,50,0005,0001,80,000Works Manager's salary25,000Factory employees salary75,000Factory rent, Taxes and Insurance9,000Power expenses12,000Other production expenses45,000General expenses35,000Sales for the year9,00,000Stock of finished goods, 31st December, 200520,000Stock of raw materials, 31st December, 200540,000
14Solution:Statement of CostParticularsRs.Opening Stock of Raw MaterialAdd: Purchases of Raw MaterialAdd: Carriage inwards (on purchases)Amount inRs.45,0004,50,0005,0005,00,000Less: Closing stock of raw material40,000Raw Material Consumed4,60,000Direct Wages1,80,000Prime Cost6,40,000Add: Factory Overheads:Works manager's salary25,000Factory employees salary75,000Factory rent, taxes and insurance9,000Power expenses12,000Other production expenses45,0001,66,000Works Cost8,06,000Add: Office Overhead: General expenses35,000Cost of Production8,41,000Add: Opening stock of finished goods5,0008,46,000Less: Closing stock of finished goodsCost of goods soldProfit (Balance)Sales (given)20,0008,26,00074,0009,00,000
Cost Accounting15Problem 2.3: From the following Trading and Profit and Loss Account for the yearending 31st December, 1995 prepare a statement of cost:ParticularsTo Opening Stock:MaterialFinished goodsTo Purchases of MaterialRs.10,00015,000To Productive WagesTo PowerTo Carriage InwardTo RoyaltyTo Cost of a specialdesignTo Gross Profit c/dTo Rent and Rates:FactoryOfficeTo Telephone ExpensesTo AdvertisementTo Electricity:FactoryOfficeTo Provision for BaddebtsTo Depreciation On:Plant and MachineryDelivery VansTo Income TaxTo SalariesTo DonationsTo EstablishmentExpensesTo Depreciation onFurniture:OfficeFactoryTo Rent of warehouseTo Net ProfitParticularsBy 000By Closing Stock:MaterialFinished 090,00015,0001,05,00026,05,000By Gross Profit b/dBy Interest on LoanBy Sales of scrap(at works cost)By Dividend ,35,00010,35,000
16Problem 3.1: Two Materials X and Y are used as follows:Minimum usage:50 units per week eachMaximum usage:150 units per week eachNormal usage:100 units per week eachOrdering quantity:X600 units; Y 1000 unitsDelivery Period:X 4 to 6 weeksY 2 to 4 weeksCalculate for each material:(a) Minimum Level(b) Maximum Level(c) Ordering LevelSolution:(a) Minimum Stock Level Re-order level - (Normal usage x NormalReorder Period)Minimum Stock Level (X) 900 - (100 x 5) 900 - 500 400 units 600 - (100 x 3) 600 - 300 300 units (Re-order Level Re-order Quantity) -Minimum Stock Level (Y)(b) Maximum Stock Level(Minimum Usages x Minimum Re-orderPeriod)
Cost Accounting17 (900 600) - (50x4)Maximum Stock Level (X) 1500 - 200 1300 unitsMaximum Stock Level (Y) 600 1000) - (50x2) 1600 - 100 1500 units(c) Ordering Level (Maximum Usage x Maximum Re-orderPeriod)Ordering Level (X) 150 x 6 900 unitsOrdering Level (Y) 150 x 4 600 unitsProblem 3.2: In manufacturing its products a company was three raw materialsA,B and C in respect of which the following apply:RawUsageper Re order PriceMaterial unitsof Quantity evelA1010,000101 to 38,000-B45,000303 to 54,750-C610,000152 to 4-2,000Weekly production varies from 175 to 225 units, averaging 200 what wouldyou expect the Quantities of the following to be?(a)Minimum Stock of A(b)Maximum Stock of B(c)Re-order Level of C(d)Average Stock Level of A
18Solution:(a) Minimum Stock of A(b) Maximum Stock of B(c) Re-order Level of C Re-order Level - Normal Usage x NormalRe-order Period) 8,000 - 2,000x2) 8,000 - 4,000 4,000 Lbs. (Re-order Level Re-order (Quantity) (Minimum Usage x Minimum Re-orderPeriod) (4,750 5,000) - (700 x 3) (9,750 - 2,100 7,650 Lbs. MaximumPeriod 1,350 x 4 5,400 Lbs.(d) Average Stock Level of AUsageMaximumRe-order½ (Minimum Stock Level MaximumStock Level) ½ (4,000 16,250) 10,125 Lbs.
Cost Accounting19Problem 3.3: A consignment consisted of two chemicals X and Y. The followingdetails are extracted:Rs.ChemicalX 800 Kg. @ Rs. 20 Per Kg. 16,000Y 500 Kg. @ Rs. 16 Per Kg. 8,00024,000Add: Railway Freight1,820Add: Sales Tax1,680A shortage of 5% is expected on the basis of past experience. What rate wouldyou adopt for pricing issues of these chemicals?Solution:ParticularsChemical XQty. Kg.Invoice Price800Chemical YValueRs.16,000Qty. Kg.500Value Rs.8,000Add: Railway Freight1,120700Sales Tax1,120500TotalLess:ProvisionShortage @ 5%TotalRate of Issue per 119.50
20Problem 4. The Personal department of a company gives you the followinginformation regarding labour. Calculate labour turnover rate using thedifferent methods.No. of workers at the beginning of the years2,000No. of workers at the end of the year2,400No. of workers resigned150No. of workers discharges70No. of workers replaced due to quits and discharges154Additional workers employed466Solution:Average number of workers employed in the year: 2,000 2,400/2 2,200Calculation of Labour Turnover Rate:(i)Separation Rate Method:Labour Turnover Rate No. of separation during a periodx 100Average number of workers employed during the same period150 70 x 100 10%2200(ii)Replacement Rate Method:Labour Turnover Rate No. of separation during a periodx 100Average number of workers employed during the same period154 x 1002200 7%
Cost Accounting(iii)21Flux Rate MethodLabour Turnover Rate No. of separations No. of replacementsx100220 154 x 100 17 %2200Problem 5. During one week the workman X manufactured 200 units. He receivedwage for a guaranteed 44 hours week at the rate Rs. 1.50 per hour. The timeallowed to produce one unit is 18 minutes. Calculate his gross wages undereach of the following methods of remunerating labour:(a)Time Rate;(b)Piece Rate with Guaranteed Weekly Wages;(c)Halsey Premium Plan, 50% Bonus, and(d)Rowan Premium PlanSolution:Calculation of Gross Wages(a)(b)Time Rate:Total Earnings Hours worked x Rate per hour 44x Rs. 1.50 Rs. 66Piece rate with guaranteed weekly wages:Time allowed per unit 18 minutesStandard production during one hour 6010---- -------- units183Rate per hour Rs. 1.50x 310 0.45
22Total Earnings(c)(d) Units produced x Rate per unit 200 x Re. 0.45 Rs. 90Since piece rate wages is more than time rate wages, the worker willget piece rate wages i.e. Rs. 90.Halsey Premium Plan, 50% Bonus:Time allowed for actual production 200 x 18 60 hours60Time taken for actual production 66 - 44 16 hours.Time taken for actual production 44 hours' Time saved 66 - 44 16 hours.Total Earnings (Time taken x Rate per hour 50% (Time saved x Rate per hour) (44 x Rs. 1.50) 50%(16xRs. 1.50) Rs. 66 Rs. 12 Rs. 78Rowan Premium Plan:Total Earnings (Time taken x Rate per hour) (Time saved)/Time allowed xTime taken x Rate per hour) (44xRs. 1.50) (16x60x44xRs. 1.50)Rs. 66 Rs. 17.60 Rs. 83.60Problem 6. From the following annual charges incurred in respect of a machine ina shop where labour is almost nil and where work is done by means of fivemachines of exactly similar type and specifications, calculate machine hourrate for one machine.1.Rent and Rate (Proportionate to the floor space occupied)for the shop4,8002.Depreciation of each machine3.Repairs and maintenance for five machines1,0004.Power consumed (as per meter) @ 25 paise per unit forthe shop5,0005.Electric charges for light in the shop500540
Cost Accounting6.7.There are two attendants for the five machines and theyare each paid23Rs. 160per monthFor the five machines in the shop there is one supervisorwhose emoluments areRs. 5008.Sundry supplies such as lubricants, cotton waste etc. forthe shop4509.Hire Purchase Installment payable for the machine(including Rs. 300 interest)1,20010.The machine usesp.m.10 units ofpower perhour.
24Solution :Computation of Machine Hour RateItems of ExpensesTotal for 5MachinesAmountfor oneMachineRs.Rs.4,800960540108Supervision (500x 12)6,0001,200Salary of Attendants (2 x 160 x er5,0001,0001,0002008,5001,700Standing Charges:Rent and RatesLightingSundry SuppliesTotal Standing ChargesMachine Expenses:Repairs and MaintenanceTotal Machine ExpensesHurly Rate for Standing Charges (3,126x400)7.82Hurly Rate for Machine Expenses (1,700x400)4.25Machine Hour Rate12.07
Cost Accounting25Notes:(i)Machine operation hours have been calculated on the basis ofconsumption of power. The machine consumes 10 units of power perhour @ 25 paise per unit. It means the cost of power per hour is 10 x 25paise i.e. Rs. 2.50 per hour. Since the total cost of power consumed forthe year is Rs. 5,000/5 i.e. Rs. 1,000 for the machine, the machineoperation hours are 1,2000/2.50 400 hours.(ii)Salary of attendants has been treated as indirect since it has beenapportioned amongst five machines.(iii)Interest included in hire purchase installment, being a financial item,has not been included in cost.Problem 7. A Production Department of a manufacturing company has threedifferent machines, for each of which it is desired to establish machinehour rate. The overhead expenses for this department for the year ended31st March, 1996 are:Rs.Consumable Stores:Rs.Power720Machine No. 1300Heat and Light400Machine No. 2500Rent and Rates2,400Machine No. 3600Insurance of Buildings200Machine No. 1400Insurance of Machine480Machine No. 2600Depreciation of Machines7,200Machine No. 3800Supervision4,400General Charges1,100Repairs and Maintenance:
26Additional information available are as follows:EffectiveH.P.Areaoccupied(Sq.ft.)Book Valueof MachinesWorkinghoursMachine No. 1510012,0001,000Machine No. 21050020,0002,500Machine No. 31540016,0002,000You are required to calculate Machine Hour Rate for each of the threemachines. Show clearly the basis of apportionment that you use.Solution:Computation of Machine Hour RateItems of OverheadTotalAmountBasis ofAllocationRs.MachineNo. 1 No. 2 No. 3Rs.Rs.Rs.Consumable Stores1,400Actual300500600Repairs & Maintenance1,800Actual400600800Power720Effective H.P.60300300Heat and Light400Area40200160Rent and Rates2,400Area2401,200960Insurance of Buildings200Area2010080Insurance of Machines480Book value120200160Depreciation of Machines7,200Book 760General Charges1,100Area110550440Total Overhead3,5308,8507,720Working Hours1,0002,5002,0003.533.543.86Machine Hour Rate (Rs.)
Cost Accounting27Notes:(i)Effective hourse Power, for apportionment of power, has beencalculated as follows:Machine No. 1 : 5 x 1,000 5,000Machine No. 2 : 10,2,500 25,000; andMachine No. 3: 15x2,000 30,000. Thus, the ratio is 1 : 5 : 6(ii)In the absence of any other information supervision and GeneralCharges havebeen apportioned on the basis of 'area'Problem 8.1: The following costing information is related to commodity 'X" for theyear ending 31st March, 2006.Rs.Purchase of raw materialsFactory rentRs.2,40,000 Stock (31-3-96):16,000 Raw materialsCarriage inwards2,880 Work-in-progressOther factory overhead80,000 Finished goods44,48040,00064,000(4000 tons)Direct wages2,00,000 Sales-Finished goodsStock (1-4-95)AdministrationOverheadRaw Materials40,000 Selling Overhead Re. 1per ton ,0005,98,0008,000
2832,000 Tons of commodity were produced during the period. You are toascertain (i) Prime Cost; (ii) Works Cost; (iii) Total Cost of Production: (iv)Gross Profit: and (v) Net Profit per ton.Solution: Statement of Cost & Profit of Commodity 'x'ParticularsOpening stock 1-4-95Add: Purchases of Raw MaterialsAdd: Carriage InwardRs.Amount Rs.40,0002,40,0002,8802,82,880Less: Closing stock 31-3-9644,480(i) Raw Material Consumed2,38,400Add: Direct wages:2,00,000Prime Cost4,38,400Add: Factory Overhead:16,000Factory Rent80,00096,0005,34,400Add: Work-in-Progress (1-4-95)9,6005,44,000Less: Work-in-progress (31-3-96)(ii) Factory CostAdd: Administration Overhead40,0005,04,0008,0005,12,000Add: Opening stock of finished products (2000tons)30,0005,42,000Less: Closing stock of finished products(4000tons)Cost of goods sold (30,000 tons)64,0004,78,000
Cost Accounting29Add: Selling Overheads:30,000Advertising, Discount and Selling Cost(30,000 tons @ Re. 1 per ton)Total Cost5,08,000Profit90,0005,98,000(iv) Gross Profit Sales - Cost of goods sold 5,98,000 - 4,78,000 Rs. 1,20,000(v) Net Profit per ton 90,000 Rs. 3.0030,000Problem 8.2: A Factory produces a standard product. The following information isgiven to you from which you are required to prepare a cost sheet for theperiod ended on 30th June, 1996:Rs.Opening stock of raw materialsPurchases of raw materialsClosing stock of raw materials20,0001,70,0008,000Direct Wages40,000Other direct expenses20,000Factory Overhead100% of Direct wagesOffice Overhead10% of works costSelling and distribution expensesRs. 2 per unit soldUnits of finished product:
30In hand at the beginning of period 2,000 (Value Rs.32,000Produced during the period20,000In hand at the end of the period4,000Also find out the selling price assuming that profit is 20% of the selling price.Solution :Statement of Cost(for the year ended 30th June, 1996)Rs.Opening stock of Raw MaterialAdd: Purchases of Raw MaterialRs.20,0001,70,0001,90,000Less: Closing stock of Raw MaterialRaw Material Consumed8,0001,82,000Direct wages40,000Direct expenses20,000Prime CostAdd: Factory Overhead (100% of Direct wages)Factory CostAdd: Office Overhead (10% of Factory cost)Cost of Production (20,000 units)Add : Cost of Opening stock finished goods ,000
Cost Accounting313,42,000Less : Closing stock of finished goods (3,10,200) x 4,00062,04020,000Cost of Goods Sold2,80,160Add: Selling & Distribution Expenses (18,000 unit XRs.2)Total Cost36,0003,16,160Add : Profit (20% on Sellin Price)Selling Price79,0403,95,200Selling Price per unit Rs. 3,95,20018,00021.96
32Problem 8.3: A Factory produced a standard product. The following information isgiven to your from which you are required to prepare the "Cost Sheet" ofProduct 'X' :Material Used :In ManufacturingIn Primary PackingRs.11,0002,000In Selling the Product300In Factory150In Office250Labour - required :In Producing2,000For Supervision of Factory Management400Expenses :Direct1,000Indirect :Factory200Office250Depreciation - Factory350Deprecation - Office Building and Equipment150Selling Expenses700Freight on Sales1,000AdvertisementAssuming that all the units manufactured have been sold, also find out theselling price which may yield a profit of 25% on the selling price.250
Cost Accounting33Solution :Statement of CostMaterial Used in manufacturing11,000Material used in Primary Packing2,000Labour required in Producing (Direct)2,000Direct Expenses1,00016,000Prime CostAdd : Factory Overhead :Material used in Factory150SupervisionManagement400ofFactoryFactory Expenses (Indirect)200Depreciation (Factory)3501,10017,100Factory CostAdd : Office Overhead :Material used in Office250Office expenses (Indirect)250Dep. on Office Building & Equipments15017,750Cost of ProductionAdd:Selling OverheadMaterial used in Selling300Selling Expenses700Freight on Sales1,000Advertisement250Total CostAdd:650Profit (25% on selling price) (20,000 x 25)2,25020,0006,667100-25Selling Price26,667
34Problem 9.1: The following information relate to contract. You are required toprepare the contract account and contractors account assuming that theamount due from contractee was duly received.Rs.Rs.Direct Materials20,250 Tractor Expenses :Direct Wages15,500 Running Material2,300Stores issued10,500 Wages of Drivers3,000Loose Tools2,400 Direct Charges2,650The contract was for Rs. 90,000 and the contract took 13 weeks in itscompletion. The value of loose tools and stores returned at the end of the yearwere Rs. 200 and Rs. 3,000 respectively. The plant was also returned at a valueof Rs. 16,000 after charging depreciation is to be charge to contract @ 15% perannum. The administration and office expenses are 10% of works cost.
Cost Accounting35Solution:Contract AccountRs.Rs.To Direct Materials20,250 By Returned to Stores:To Direct Wages15,500Loose ToolsTo Stores issued10,500StoresTo Loose ToolsBy Works Cost c/dRunning Material2,300Wages of Drivers3,000To Other Direct Charges16,00058,1502,65020,000To depreciation on TractorTo Works Cost b/d3,0002,400 By Plant returned (20,00-4,000)To Tractor Expenses :To Plant (Cost)20075077,35077,35058,150 By Contractee's A/c90,000To Administration & OfficeExpenses(10% onW.C.)To Profit & Loss A/c5,81526,03590,00090,000Contractor's AccountTo Contract A/c90,000 By Bank A/c90,000Working Notes:1.Calculation of original cost of Plant :Depreciated Value Rs. 16,000Rate of Depreciation 20%Cost of Plant Rs. 15,000 x 100/80 Rs. 20,000
362.Calculation of Depreciation on TractorDepreciation Rs. 20,000 x 75 /100 x 13/52 Rs. 750Problem 9.2 : A building contractor having undertaken construction work at acontract price of Rs. 5,00,000 began the execution of the work on 1st April1995. The following are the particulars of the contract upto 31st March, 1996:Rs.Machinery InstalledRs.30,000 Work certified3,90,000Materials set1,60,698 Cash received3,60,000Labour at site1,48,750 Cost of workuncertified9,060Direct expenses6,334 Materials in hand3,766Overhead charges8,252 Wages accrued5,380Materials returned1,098 Machinery at site22,000It was decided that the profit made on the contract in the year should bearrived at by deducting the cost of the work certified from the total value ofthe architect's certificates that 1/3 of the profit so arrived at should beregarded as a provision against contingencies and that such provision againstcontingencies should be increased by taking to the credit of the profit and lossaccount only such portion of the 2/3 profit as the cash received bears to thework certified. After taking into consideration the above, prepare contractaccount.
Cost Accounting37Solution :Contract AccountFor the year ended 31st March, 1996ParticularsRs. ParticularsRs.To Materials sent1,60,698 By Materials returned1,098To Labour at site1,48,750 By Materials in hand3,76630,000 By Machinery at site22,000ToinstalledMachineryTo
Q.10 Difference between costing & cost accounting. Ans. (1) Costing is a dynamic technique in which changes may take place from time to time in comparison to cost accounting that enables to determine and control the cost of manufactured goods. (2) Costing include determination of cost. Cost accounting include recording expenditure and income.
Cost Accounting 1.2 Objectives and Functions of Cost Accounting 1.3 Cost Accounting and Financial Accounting — Comparison 1.3 Application of Cost Accounting 1.5 Advantages of Cost Accounting 1.6 Limitations or Objections Against cost Accounting 1.7 Installation of a costing system 1.7 Concept of Cost 1.9 Cost Centre 1.10 Cost Unit 1.11 Cost .File Size: 1MB
FINANCIAL ACCOUNTING : MEANING, NATURE AND ROLE OF ACCOUNTING STRUCTURE 1.0 Objective 1.1 Introduction 1.2 Origin and Growth of Accounting 1.3 Meaning of Accounting 1.4 Distinction between Book-Keeping and Accounting 1.5 Distinction between Accounting and Accountancy 1.6 Nature of Accounting 1.7 Objectives of Accounting 1.8 Users of Accounting Information 1.9 Branches of Accounting 1.10 Role .
Unit 1: Introduction to Cost Accounting Notes LOVELY PROFESSIONAL UNIVERSITY 1 Unit 1: Introduction to Cost Accounting CONTENTS Objectives Introduction 1.1 Meaning and Defi nition of Cost Accounting 1.2 Scope and Use of Cost Accounting 1.3 Relationship between Financial Accounting and Cost Accounting 1.4 Role of Cost Accounting in Decision Making
1. What does cost accounting involve? A. Drawing up balance sheet B. Writing off of costs C. Ascertainment of cost D. Preparation of statement of value added E. Annual audit of financial statement 2. Cost accounting is an integral part of A. Financial accounting B. Forensic accounting C. Treasury accounting D. Historical accounting
para 5.4 of CAS-17, Cost Accounting Standard on Interest and Financing Charges; para 5.2 of CAS-18, Cost Accounting Standard on Research and Development Costs; para 5.6 of CAS-19, Cost Accounting Standard on Joint Costs; para 5.3 of CAS-20, Cost Accounting Standard on Royalty and Technical Know-how Fee;
ACCT 2100 Principles of Accounting 3 Ph.D. Accounting Virginia Tech Yes ACCT 3131 Cost Accounting I 3 Yes Berrigan, Isabel M ACCT 3124 Governmental Accounting 3 M.S. Accounting - Auditing University of New Orleans No ACCT 2100 Principles of Accounting 3 M.S. Accounting University of New Orleans No ACCT 3
Level 3 Accounting OVERVIEW – Course Information page ii General Overview NCEA Level 3 Accounting covers partnership accounting, company accounting, company annual report interpretation, cost accounting, management accounting and decision making. The Accounting Scholarship Standard is one standard with a focus on repo
Before accepting any instruction, the expert witness must ensure that the services required of them and all terms and conditions are clearly identified in writing and that they are aware of and compliant with the following: Protocol for the Instruction of Experts to give Evidence in Civil Claims (‘Protocol’); Civil Procedure Rules Part 35 Experts and Assessors (‘PR35 .
